Fannie Mae will allow qualified renters to sign month-to-month leases and stay on in homes it forecloses on — without requiring a security deposit, credit check or payment history — while it markets the homes for sale.
The new National REO Rental Policy is intended to limit the disruption to the lives of renters when their landlord is foreclosed on, and "bring a measure of stability to communities impacted by high foreclosure rates," said Fannie Mae Chief Operating Officer Michael Williams in a statement.
Freddie Mac is reportedly developing a similar policy. Fannie Mae’s program applies only to renters — not the owner of the property or their immediate family — and requires that homes meet state laws and local code requirements for a rental property.
All types of single-family property are eligible for the program, including two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Properties with loans insured by FHA will require approval from the Department of Housing and Urban Development (HUD).
Rents will be set at market rate by reviewing local comparable rents, conducting a neighborhood survey, or using "other relevant indicators," Fannie Mae said. Properties will be managed through a real estate broker or a property management company, which will be required to coordinate property repairs and respond to any property safety issues.
After a foreclosure is complete, renters will be offered a "Cash for Keys" incentive payment to vacate the property, or have the option of signing a new month-to-month lease with Fannie Mae.
In late November, Fannie Mae and Freddie Mac suspended the process of evicting about 16,000 troubled borrowers or selling their homes while they implemented a streamlined loan modification program intended to prevent foreclosures (see story).
Fannie Mae announced last week it was extending the suspension of foreclosure sales and evictions through Jan. 31. The company said Tuesday that the new National REO Rental Policy will be fully in place by the time the suspension is lifted.
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